Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved.

Chapter 9 Local Marketing in New Growth Markets

Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. IntroductionIntroduction Two Kinds of Markets Two kinds of new growth countries Markets that are relatively rich in natural raw materials Markets that have turned toward Western-style capitalism more recently With the help of foreign direct investment The Role of Trade Blocs Membership in trade blocs plays a very important role for two reasons It makes the country more attractive to foreign investors It creates an trading region with an enlarged market potential

Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. IntroductionIntroduction Market Segmentation New growth markets are in the growth phase of the PLC This makes them attractive for entry Market segmentation in these countries differs from that in the developing countries primarily in the degree to which A core middle class is developed Product Positioning In new growth markets it is easy to observe the attention given to well-known brand names

Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. IntroductionIntroduction Marketing Tactics Product Basic localization to make sure the product functions well is necessary in these markets, and customers can be as demanding as elsewhere Pricing Pricing is important but can largely reflect the same considerations as in the advanced markets—demand, costs, competitive conditions Distribution Distribution is very important and warrants larger margins and more support services than elsewhere Promotion Promotional support, tie-ins with local representatives, and an open mind in regard to trusting locals will be more justified in the future

Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. Close-Up: Marketing in Latin America Marketing Environment Overall the region is poor At least 50 percent of the wealth is controlled by 20 percent of the people in almost all of the countries in Latin America

Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. Close-Up: Marketing in Latin America Regional Trade Agreements LAIA – Latin American Integration Association All South American countries and Mexico ANCOM – Andean Common Market ANCOM means reduced tariffs, increased intraregional trade, free factor mobility, and a political climate more favorable to foreigners MERCOSUR – Southern Cone Common Market A common market consisting of Argentina, Brazil, Paraguay, and Uruguay NAFTA – North American Free Trade Area The 1994 ratification of NAFTA has meant that Mexico has moved closer to its northern neighbors

Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. Close-Up: Marketing in Latin America Market Segmentation Market segmentation in Latin America is often based on the simple distinction between urban versus rural population Product Positioning Companies targeting affluent urban buyers can generally apply the strategies used in more mature markets Marketers targeting low-income consumers need to approach this segment more cautiously

Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. Close-Up: Marketing in Latin America Marketing Tactics Product Policies Two factors causing Latin American markets to continually upgrade their products and services The increased competition from foreign producers The implementation of trade agreements between Latin American countries Pricing As long as the historical inequality in incomes holds in Latin America, global entrants will have to focus on the urban markets, leaving the lower- price end of the range to local companies

Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. Close-Up: Marketing in Latin America Marketing Tactics Distribution Distribution in Latin America is moving toward the larger integrated units and the chain concept Common in European and North-American markets Promotion Among urban consumers Research has shown that adult Latin Americans want detailed product information in advertising and tend to reject image-oriented ads In rural areas Marketing communications are dominated by the need to overcome illiteracy

Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. Close-Up: Marketing in Latin America Major Country Markets Argentina The currency crisis of Argentina at the beginning of 2002 has thrown the country with its 36 million people and the highest standard of living in Latin America into turmoil However, its membership in Mercosur has served to attract foreign companies such as IBM and General Motors looking for entries into the larger region Brazil Brazil is the largest of the Latin-American countries 163 million people. Generates a third of South America’s economic output and is a major consumer of its exports

Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. Close-Up: Marketing in Latin America Major Country Markets Chile Chile with its 15 million people is perhaps the most vigorous example of recent Latin American growth Mexico The 99 million people of Mexico make the country the second-largest market (after Brazil) in Latin America The Mexico City metropolitan area provides a major market for global brands and upscale consumer goods Pan-Regional Marketing Some observers argue that a marketing strategy aimed at the Latin-American region overall will be effective

Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. Close-Up: Marketing in Latin America Pan-Regional Marketing Burger King in Latin America Burger King’s expansion in Latin America has taken the form of joint ventures, franchise agreements, and alliances with U.S. consumer products companies such as Coca-Cola IBM in Latin America IBM’s long-term strategy for Latin America Includes spending millions of dollars to bring computer technology to local schools in 11 countries This program is intended to enhance the company’s image and also create a market with loyal future customers for its products and services

Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. Close-Up: Marketing in the New Asian Growth Markets Market Environment Several of these countries are ethnically homogeneous while others are populated by several racial groups Regional Trade Agreements The Association of South East Asian Nations (ASEAN) was created in 1967 APEC (Asia-Pacific Economic Cooperation) is a large association that spans both sides of the Pacific In 1992, ASEAN countries met to formalize a far-reaching trade agreement forming the ASEAN Free Trade Area (AFTA)

Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. Close-Up: Marketing in the New Asian Growth Markets Market Segmentation The economic upswing in the Asian high-growth markets has led to the emergence of a significant middle class in Thailand known as the “have somes” However justified from an economic perspective, avoiding the rural areas where people tend to be less well off can create some political problems Product Positioning The Asian markets’ desire for global identification has made many multinationals with more mundane products use global standardization in their positioning strategies

Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. Close-Up: Marketing in the New Asian Growth Markets Marketing Tactics Product Policies The emphasis on these markets as followers of global mature markets makes standardized product policies natural Product Design The Asian consumer is generally more eager to achieve “a harmonious whole” than Western individuals New Products The buyers in Asian markets are basically eager to get access to the products they see available in mature foreign markets These are not lead markets but followers

Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. Close-Up: Marketing in the New Asian Growth Markets Marketing Tactics Pricing In Asia as elsewhere, the global marketer faces a choice between a high skimming price strategy and a lower penetration price strategy Distribution Many observers agree that the most visible sign of economic growth in the Asian markets is the dynamism of the urban retail sector Promotion By and large the promotional strategies employed by multinationals in Asian markets have been only minimally adapted from elsewhere

Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. Close-Up: Marketing in the New Asian Growth Markets Major Country Markets South Korea Korea has 45 million people and in 1995 a per capita income on par with many European countries Taiwan Taiwan is considered to have particularly exacting customers, which makes the country useful as a test market for new products targeting Asia Hong Kong The 6 million inhabitants of Hong Kong have long been the most affluent of the East Asian people, except for the Japanese

Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. Close-Up: Marketing in the New Asian Growth Markets Pan-Regional Marketing The Asian markets naturally lend themselves to pan-regional strategies because of their cultural similarity and parallel development paths, with Japan as the lodestar The trading blocs offer a good starting point for pan-regional strategies It is expected that pan-AFTA strategies may be very viable in the future